Private Equity

WestCap Private Equity investment involves investors buying into a young private company at a very early phase of its development. In return for the cash injection, the investor receives an equity stake in the company.

The investment has huge growth potential limited only by the growth potential of the company bought into. At West Capital Markets we believe that the potential for above average returns makes it a sound investment for investors.

Investors through WestCap Private Equity will generally receive a return on their investments through one of three ways: an IPO, a sale or merger of the company we control, or a recapitalisation. Unlisted securities may be sold directly to investors by the company (called a private offering) or to a private equity fund, which pools contributions from smaller investors to create a capital pool.

Features

Considerations for investing in WestCap Private Equity Funds relative to other forms of investment include:

• Substantial entry costs; with most private equity funds requiring significant initial investment (usually upwards of GH 500,000) plus further investment for the first few years of the fund. At WestCap, we are very flexible and entry costs, are in most cases, negotiable dependant on the investment opportunity.

• Investments in limited partnership interests (which is the dominant legal form of WestCap Private Equity investments) are referred to as ‘illiquid’ investments which should earn a premium over traditional securities, such as stocks and bonds. Once invested, it is very difficult to gain access to your money as it is locked-up in long-term investments which can last for as long as five years. Distributions are made only as investments are converted to cash; limited partners typically have no right to demand that sales be made.

• If West Capital Markets can’t find suitable investment opportunities, it will not draw on an investor’s commitment. Given the risks associated with private equity investments, West Capital Markets are very particular in regards to companies we invest in. West Capital Markets mostly provide interim investments to companies which have already proven their viability but have yet to raise money from public markets.

• Consistent with the risks outlined above, WestCap Private Equity can provide high returns let your money work for you.

WestCap Private Equity fundraising

WestCap Private Equity fundraising refers to the action of seeking capital from investors. Typically an investor will invest in a specific fund managed by WestCap, becoming a limited partner in the fund, rather than an investor in the firm itself. As a result, an investor will only benefit from investments made by WestCap where the investment is made from the specific fund that they have invested in.

• Fund of funds. These are whereby WestCap Private Equity funds invest in other private equity funds in order to provide investors with a lower risk product through exposure to a large number of vehicles often of different type and regional focus. Fund of funds accounted for 14 % of global commitments made to private equity funds in 2006 according to Private Equity Intelligence Ltd.

• Individuals with substantial net worth. This is often required by the law as well, since private equity funds are generally less regulated. For example in the US, most funds require potential investors to qualify as accredited investors, which requires $ 1 million of net worth, $ 200,000 of individual income, or $ 300,000 of joint income (with spouse) for two documented years and an expectation that such income level will continue.

As fundraising has grown over the past few years, so too has the number of investors in the average WestCap Private Equity fund. In 2004 there were 26 investors in the average private equity fund, this figure has now grown to 42 according to Private Equity Intelligence Ltd.

It is also worth noting that WestCap Private Equity funds themselves will also invest in their own vehicles, typically providing between 1–5 % of the overall capital.

Often WestCap will employ the services of external fundraising teams known as placement agents in order to raise capital for our vehicles. The use of placement agents has grown in private equity over the past few years, with 40 % of funds closed in 2006 employing their services according to Private Equity Intelligence Ltd. Placement agents will approach potential investors on behalf of the WestCap fund manager.

The amount of time WestCap spends raising capital varies depending on the level of interest. WestCap can spend as little as three to six months raising capital where we are able to reach the target that we set for our funds relatively easily, often through gaining commitments from existing investors or our strong relationship with major financial capitals. Once a fund has reached its fundraising target, it will have a final close. After this point it is not normally possible for a new investor to invest in the fund, unless they were to purchase an interest in the fund on the secondary market.

For the above mentioned reasons, private equity fund investment is for those who can afford to have their capital locked in for long periods of time. This is balanced by the potential benefits of annual returns which range up to 50 % for successful investments.